If You Thought The Trillion Dollar Coin Was Absurd, You Should See What The Fed Does Every Dayhttp://www.businessinsider.com/the-trillion-dollar-trick-2013-1/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Tue, 03 Mar 2015 17:39:24 -0500Peter Schiffhttp://www.businessinsider.com/c/50f7ff04eab8eaeb5000001fRaunaqThu, 17 Jan 2013 08:39:16 -0500http://www.businessinsider.com/c/50f7ff04eab8eaeb5000001f
I understand about the FED purchasing government bonds from the market and infusing liquidity into the system. But with the purchase by the Fed, what happens to the debt obligation of the government? I remember reading somewhere that the government gets exempted from making interest payments to the Fed in such a case. If this is just a case of a debt instrument exchanging hands from one party to the others, shouldn't the obligation still exist? This also goes with the principle of the Fed being an independent entity from the government and the govt treasury. Please do enlighten me if iam missing something.http://www.businessinsider.com/c/50f6f69769beddd64b00000ayisterwaldWed, 16 Jan 2013 13:51:03 -0500http://www.businessinsider.com/c/50f6f69769beddd64b00000a
"...we know intuitively that a coin's value is supposed to come from its metal content."
We also know intuitively that the earth is the center of the universe, or that heavy things fall faster than light thing, or that people who do not understand our language will do so if we raise our voices. Often what we "know" intuitively is wrong.http://www.businessinsider.com/c/50f6e7b369beddc22400000aMy WagWed, 16 Jan 2013 12:47:31 -0500http://www.businessinsider.com/c/50f6e7b369beddc22400000a
In 2001 and 2003 we were warned (Greenspan...Mr Bubbles) that we were paying off our debt too fast.http://www.businessinsider.com/c/50f6e079ecad04f159000007lakersWed, 16 Jan 2013 12:16:41 -0500http://www.businessinsider.com/c/50f6e079ecad04f159000007
agreed...but the worry is that when this whole phony economy collapses, that the government and the left will take us in the wrong direction---to complete socialism and government takeover. i bet they are going to blame the next crisis on capitalism like they always have, and just demand more governmenthttp://www.businessinsider.com/c/50f6dff969bedd7212000001lakersWed, 16 Jan 2013 12:14:33 -0500http://www.businessinsider.com/c/50f6dff969bedd7212000001
except the government would not be able to engage in all this fiscal policy were it not for the fed;s monetary policy. the easy monetary policy is what is making interest rates so low right now, which is what allows the federal government to be spending all this money. with higher rates, this wouldn't be possible. the fed is therefore the enabler of big government and fiscal profligacyhttp://www.businessinsider.com/c/50f6df8a6bb3f79b4000000alakersWed, 16 Jan 2013 12:12:42 -0500http://www.businessinsider.com/c/50f6df8a6bb3f79b4000000a
I think that is against the fed's mandate and is illegal for the treasury to do. the fed I believe is legally prohibited from monetizing government debt outright, so they do it through the bankshttp://www.businessinsider.com/c/50f6df0e69bedda50c00001blakersWed, 16 Jan 2013 12:10:38 -0500http://www.businessinsider.com/c/50f6df0e69bedda50c00001b
No, he says that if you have too many credit cards maxed out and can't afford your meal, you better start getting to work cleaning the disheshttp://www.businessinsider.com/c/50f6db1969beddc87e00000fsundown858Wed, 16 Jan 2013 11:53:45 -0500http://www.businessinsider.com/c/50f6db1969beddc87e00000f
That's a good question. I think it might work like this. The whole idea is to avoid inflation. Naturally if the gov just prints a batch of money each time it needs it, inflation would result. But if the government sold debt, the money would come from people's savings, foreign countries, etc. Therefore, money would be taken out of the money supply and inflation would be subdued. Now enter the Fed and QE. No one has the money or wants to buy government debt so the Fed steps in and says, "we'll buy it" and the money we pay for it with are electronically created credits put into the auctioning banks. So before you had an equalibrium of money supply, not you just have a one way flow of money.http://www.businessinsider.com/c/50f6d6e0eab8ea143c00000aDownhill from hereWed, 16 Jan 2013 11:35:44 -0500http://www.businessinsider.com/c/50f6d6e0eab8ea143c00000a
There's a big difference between fiscal and monetary policy. The Fed may create 'money' out of thin air, but it doesn't do so buy purchasing air craft carriers, building bridges, or paying for people's medical bills. The direct purchase of these things through fiscal policy impacts demand (labor, materials, etc). The Fed's actions impact money supply and interest rates. These may or may not (as we have seen in the past) influence demand depending on the actions of financial institutions. While I would agree that the multiple QE's have blurred the line in my argument somewhat over the last few years (specifically MBS purchases), I am surprised that Schiff doesn't seem to understand the fundamental economic distinction between fiscal and monetary policy.http://www.businessinsider.com/c/50f6cbb6eab8ea9820000006Dave WilliamsWed, 16 Jan 2013 10:48:06 -0500http://www.businessinsider.com/c/50f6cbb6eab8ea9820000006
Thanks sundown. But why doesn't the government (fed plus treasury together so I don't get confused and because the separation of treasury from the fed is a contrived arrangement) just pay its bills with newly created money rather than borrow it?http://www.businessinsider.com/c/50f6c23569bedd023f000026sundown858Wed, 16 Jan 2013 10:07:33 -0500http://www.businessinsider.com/c/50f6c23569bedd023f000026
In a nutshell, it works this way:
1. The FOMC first approves the purchase of US government bonds on the 'open market'. [When the government is short of funds, the Treasury issues bonds and delivers them to independent bond dealers, which auction them off.}
2. When the FED wants to "expand the money supply'"i.e. create money the New York Fed bank buys these government bonds from the independent securities dealers (financial markets always have an equal number of buyers and sellers).
3. The Fed pays for its purchases with electronic credits to the sellers' banks, which, in turn, credit the sellers' bank accounts. These credits are literally created out of nothing.
4. The banks receiving the credits use them as reserves and loan out several times the amount of the money held in reserve due to the magic of fractional reserve banking. If their reserve requirement is 10% then 10 times the money put into reserve can be loaned out. The banks can create new loans because of these increased reserves. As the money is loaned the money supply in the U.S. increases.http://www.businessinsider.com/c/50f6c04fecad048f19000022sundown858Wed, 16 Jan 2013 09:59:27 -0500http://www.businessinsider.com/c/50f6c04fecad048f19000022
Trillion dollar coins, raising debts ceilings, selling more bonds, etc are all a version of the same thing...creating fiat currency to pay for our materialist, selfish, consumerist world view and lifestyle. People will listen to Schiff, followers of Mises, and others...but that'll be after their Keynsian utopian dream has ended and they have woken up to hyper inflation and hyper hysteria.http://www.businessinsider.com/c/50f6be47eab8eab902000017Dave WilliamsWed, 16 Jan 2013 09:50:47 -0500http://www.businessinsider.com/c/50f6be47eab8eab902000017
There is an inconsistency in the argument here: why would the government BORROW money that it can create on its own through a computer at no cost? It would be like me needing to borrow more letters so I can type this nte (srry, it lks like I just ran ut f the letter that cmes after 'n'!).http://www.businessinsider.com/c/50f6be3b69bedd1739000014orangeatangeWed, 16 Jan 2013 09:50:35 -0500http://www.businessinsider.com/c/50f6be3b69bedd1739000014
Peter Schiff says it's ok to walk out on your restaurant tab if you have to many credit cards maxed out ha.